Derivative Financial Instruments

6 Months Ended

Mar. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

Cash Flow Hedges of Interest Rate Risk

The Trust’s objective in using interest rate derivatives is to add stability to variable rate interest payments and expense by managing its exposure to interest rate movements. To accomplish this objective, the Trust primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt

of variable amounts from a counterparty in exchange for the Trust making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (loss) on our consolidated balance sheets and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

As of March 31, 2015, the Trust had the following outstanding interest rate derivative that was designated as a cash flow hedge of interest rate risk (dollars in thousands):

Interest Rate Derivative	Notional		Rate		Maturity
Interest rate swap	$	1,718	5.25	%	April 1, 2022

The table below presents the fair value of the Trust’s derivative financial instrument as well as its classification on the consolidated balance sheets as of the dates indicated (amounts in thousands):

Derivatives as of:
March 31, 2015			September 30, 2014
Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Accounts payable and accrued liabilities	$	56	Accounts payable and accrued liabilities	$	8

As of March 31, 2015, the Trust did not have any derivative instruments that were considered to be ineffective and does not use derivative instruments for trading or speculative purposes.

Note 9 – Derivative Financial Instruments - continued

The following table presents the effect of the Trust’s interest rate swap on the consolidated statements of comprehensive (loss) income for the dates indicated (dollars in thousands):

	Three Months Ended March 31,						Six Months Ended March 31,
	2015			2014			2015			2014
Amount of loss recognized on derivative in Other Comprehensive Income	$	(28	)	$	(25	)	$	(60	)	$	(7	)
Amount of loss reclassified from Accumulated Other Comprehensive Income into Interest Expense	$	(8	)	$	(8	)	$	(17	)	$	(17	)

No gain or loss was recognized related to hedge ineffectiveness or to amounts excluded from effectiveness testing on the Trust’s cash flow hedges during the three and six months ended March 31, 2015 and March 31, 2014. The Trust estimates an additional $30,000 will be reclassified from other comprehensive income (loss) as an increase to interest expense over the next twelve months.

Credit-risk-related Contingent Features

The agreement between the Trust and its derivatives counterparty provides that if the Trust defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, the Trust could be declared in default on its derivative obligation.

As of March 31, 2015, the fair value of the derivative in a net liability position, which includes accrued interest, but excludes any adjustment for nonperformance risk related to this agreement, was $56,000. As of March 31, 2015, the Trust has not posted any collateral related to this agreement. If the Trust had been in breach of this agreement at March 31, 2015, it could have been required to settle its obligations thereunder at its termination value of $56,000.